FAQs
Strengthening and stabilising finances and reducing the structural deficit.
The delivery of current service levels.
Addressing a growing backlog in infrastructure maintenance and renewal.
Reducing internal and external debt associated with the North Sydney Olympic Pool redevelopment.
Securing financial sustainability to meet the needs of a growing and changing population.
A process mapping initiative, initially targeting 250 high-priority processes, with plans to expand to 1,000 over time. This effort aims to identify opportunities for greater operational efficiency.
A new service level review framework to ensure that Council’s services are aligned with the evolving needs and expectations of the community.
Service unit planning to identify workforce development priorities, opportunities for process improvement, and areas for financial review.
A development and performance framework to support the creation of a high-performing workforce.
A new workforce strategy aimed at positioning Council as a competitive employer in a challenging environment marked by skills shortages.
North Sydney has one of the lowest minimum rates in metropolitan Sydney. Over 77% of residents currently pay the minimum rate and this does not support the level and variety of Council services currently offered to each household. To improve equity and ensure revenue keeps pace with growing unit developments, Council proposes increasing minimum rates in 2024-25 to:
$1,300 for residential properties
$1,400 for businesses
Repay internal and external borrowings;
Fund infrastructure renewals and reduce current infrastructure backlogs;
Fund some upgraded and new infrastructure (Options 2 and 3)
the reserve has sufficient funding; and
Council has sufficient funding from general revenue to meet approximately half the cost of the new infrastructure.
North Sydney’s population is growing and demand for new public places and spaces is growing with it.
Assets/property can only be sold once. One of the largest challenges facing North Sydney is the cost of land which will only increase over time. Council is unlikely to be in a financial position to buy land in the future as the community grows.
Council’s current commercial property portfolio is largely located on sites of strategic significance for the community, including the civic area in Miller Street.
What is a 'rate peg'?
The rate peg is the maximum percentage amount by which a council may increase its rates income for the year.
The NSW Independent Pricing and Regulatory Tribunal (IPART) set the rate peg. The rate peg for North Sydney Council in 2025/26 is 4%.
What is a Special Rate Variation (SRV)?
A Special Rate Variation (SRV) refers to an increase in total general rates that is greater than the published rate peg. Each year, the Independent Pricing and Regulatory Tribunal (IPART) sets a rate peg for every council in NSW, which is based on the expected cost increases that councils will incur. When councils need to increase total rates by more than the rate peg, they must apply to IPART for an SRV.
For an SRV to be approved, councils must demonstrate that they have met the criteria set out by the Office of Local Government (OLG), including demonstrating that there is a need for the SRV, ensuring that the community is aware of the proposed SRV, understanding the community’s capacity to pay for the increase and making sure that the council’s planning and reporting documents (particularly its Long Term Financial Plan) reflect the need and scope for the proposed SRV.
For North Sydney Council, the proposed SRV is critical to:
Why does North Sydney need to consider an SRV?
Several factors have contributed to Council’s current financial challenges:
North Sydney Olympic Pool redevelopment: This major project has significantly impacted the Council’s financial position. External debt has increased, and internal reserves have been drained, further reducing Council’s asset renewal capacity. In addition, ongoing costs associated with interest repayments and future renewal costs will add to operating deficits already experienced.
Declining revenue from other sources: Historically, the Council adopted a diversified approach to revenue generation to reduce its reliance on rates. Traditionally, around 45% of total operating revenue has been generated through user charges, fees, and other non-rate income. This includes on-street parking fees, fines, advertising revenue, and commercial rental income. While this strategy has lessened the financial burden on residents and businesses, it has also exposed the Council to financial shock and fluctuations in income. Since the 2020 COVID-19 pandemic, adjusting for inflation, income from user charges, fees, and other revenue streams, it is estimated that revenue for the current fiscal year is down by $9.9 million. The cumulative effect of declining revenue has also impacted reserve levels and capacity for infrastructure renewal.
Asset maintenance and renewal: Current estimates of infrastructure backlog indicate a history of underinvestment in asset renewal, which has compounded over time and further exacerbated funding challenges. In particular, 62% of Council building assets have been assessed at a rating of less than ‘good’, which limits their ability to best service the community. Addressing this backlog will require targeted, sustained investment to bring infrastructure management up to a level that meets both current and future community expectations.
Cost increases: Costs have increased faster than revenue in recent years. While IPART has addressed some of these issues through rating reforms implemented in July 2024, historical gaps remain, exacerbating the financial strain. Like many Councils, we have had to cut back on asset expenditure, leading to a growing backlog of capital works.
Outdated information systems and technology: Over the past two years, Council has actively reviewed its operations to identify opportunities for improvement. While progress has been made, Council’s ability to generate efficiencies is constrained by its outdated suite of information systems and technology. These systems are not integrated, require excessive manual intervention, and lack the sophistication needed to support timely decision-making. The inefficiencies caused by these systems are a major source of frustration for the workforce and, indirectly, for residents and customers, negatively impacting the overall customer experience.
Historically low rates income: Historically, residential rates have remained low, providing under 44% of Councils operating revenue, due to reliance on other sources of income. This is no longer sustainable. The following chart shows a comparison of current and forecast residential rates with other Councils in the region and across Sydney. This does not factor in SRV’s currently being proposed in these Council areas.
Outside of an SRV, what is Council doing to improve its performance?
Council has initiated a comprehensive program of review and improvement to ensure the effective use of public funds. In 2023, a major realignment of the organisational structure was implemented, establishing a clear leadership and service unit framework. As a result of this realignment, over $6.4 million in employee benefits and oncosts were reallocated to streamline leadership structures and address critical resource needs in areas such as risk management, commercial property management, parks and gardens maintenance, organisational improvement, technology, and strategic planning.
Ongoing and future review and improvement programs include the introduction of:
Despite these significant commitments to improve organisational efficiency, Council’s ability to generate efficiencies is constrained by its information systems and technology.
What options is North Sydney considering?
Council is consulting on four SRV options, which present different levels of financial strength and sustainability for North Sydney. Options one, two and three are different in size and reflect a different level of benefit. Options 2a and 2b provide the same benefits but have different implementation paths.
Key benefits for each option:
Option 1: Financial repair – focuses on financial repair, improvement to governance and administration, the delivery of critical infrastructure backlog projects and managing debt repayments.
Option 2a and 2b: Strength and sustainability – includes everything in option 1 as well as delivery of community infrastructure and service priorities developed in response to widespread consultation in May and June 2024.
Option 3: Future growth – delivers everything in Options 2a and 2b, as well as additional funding to bring building infrastructure to a ‘good’ condition, over a ten-year period commencing in year 4.
What do the expanded services and new and upgraded infrastructure include?
This refers to expanded services and new and upgraded infrastructure identified in the eight draft informing strategies. These strategies are currently on exhibition until Friday 10 January, and we welcome community feedback at https://yoursay.northsydney.nsw.gov.au.
A list of all capital works projects identified within the informing strategies is also provided in the appendix at the end of the Long-Term Financial Plan (LTFP).
Some of the key projects included in this list include the delivery of a community facility at Berrys Bay, upgrades to North Sydney Indoor Sports Centre, improved drainage infrastructure for sports fields, major upgrades to North Sydney Oval, upgraded amenities at Tunks Park, footpath improvements, cycling infrastructure, upgrade and expansion of Stanton Library, Cremorne Plaza and Langley Place upgrade, and other public domain upgrades in town centres.
What is a minimum rate?
A minimum rate is the minimum amount of a rate that can be levied on each parcel of land. Individual rates are calculated on the unimproved land value of a property. This can mean that the rates paid by individual houses on a block of land can be significantly more than for units on land of a similar value. Unit holders receive the same level of services from councils and often have comparable ability to pay rates as those in houses. For councils, like North Sydney, minimum rates help ensure a degree of equity between the rates paid by ratepayers in units and houses.
What are the proposed changes to minimum rates?
After 2024-25, minimum rates will increase by the approved rate path, which may either be one of the proposed SRV options or the rate peg.
For comparison purposes, it is important to note that in addition to the minimum rate, residential rate payers pay an average of $129.34 in infrastructure, environmental and main street levies – calculated as a base amount plus an ad valorem component based on their land value.
These special levies will not be charged in addition to the minimum rate under the new SRV proposal. Instead it is proposed that this special levy income which is currently levied as a separate charge be rolled into the ordinary rate revenue.
If your property is subject to a minimum, this means that these levies will not be an additional charge in future.
What do the proposed SRV options mean for rates?
The rates you pay depends on the unimproved land value of your property. The average rates that would result from each of the SRV options are outlined below.
Council has also recently reviewed its rating structure and proposes the removal of the infrastructure, environmental and main street levies mentioned above which are currently paid separately to rates. The income from these levies would be incorporated into the ordinary rate charged. This would mean that total permissible rates income is raised entirely through ordinary rates, making the Council’s rating structure simpler and more equitable. Residents are paying approximately 90% of all the levies, whereas they pay 60% of total ordinary rates and receive approximately 60% of the benefits from council services. These changes mean that residents would pay 60% of the total permissible income and businesses pay 40%. The averages below show this change, with the levies that are included in the average for 2024-25 and rolled into ordinary rates from 2025-26 onwards.
How can I find out more and have my say?
Council is committed to engaging with the community and is actively seeking feedback on the SRV proposal, updated Long Term Financial Plan, Delivery Program, Asset Management Strategy and Informing Strategies. Community consultation is open from Wednesday 27 November 2024 to Friday 10 January 2025 to align with the IPART application submission deadline. Please visit https://yoursay.northsydney.nsw.gov.au to learn more and have your say.
What are the next steps
Once the community consultation period concludes, Council will review the feedback received. A report will then go to Council for their consideration of the feedback. Council will decide whether to proceed with the SRV application. If Council decides to proceed, the application will be submitted to IPART in early 2025. IPART will conduct its own consultation, with public submissions likely to be sought, before they make their determination in May 2025. If the SRV application is successful, Council will then need to resolve to include the SRV in its rates from 1 July 2025. The new Community Strategic Plan, Delivery Program, Resourcing Strategy and Operational Plan will also come into effect from 1 July 2025.
I’ve heard Council recorded a surplus of $13M in 2023/24, so why do we need a Special Rate Variation (SRV)?
Within Local Government, financial performance is measured by way of the ‘Net operating result for the year before grants and contributions provided for capital purposes.’ For 2023/24, Council recorded a deficit of $3.6 million. The Office of Local Government measures Council’s performance by excluding these capital revenues.
The reason capital grants and contributions are excluded from this measure is because these grants fund infrastructure and/or infrastructure reserves for new infrastructure. These funds cannot be used to fund operational costs.
The Office of Local Government benchmark for Operating Performance Ratio is 0%, why is North Sydney Council aiming for a higher ratio?
Operating performance is the measure of income coming in and expenses going out. Having an operating performance ratio of 0% assumes that no capital funding is required for outgoings such as loan repayments, new and upgraded infrastructure or to mitigate the inflationary nature of asset renewal costs.
Through the SRV proposal, Council has set its operating surplus at a level that will:
Do other levels of government provide funding towards services and infrastructure provided by Council?
Council receives an annual financial assistance grant from the Australian Government of approximately $2.4 million, or approximately 1.78% of total operational income. This grant is used towards Councils operational costs.
In addition to the financial assistance grant, Council receives a range of smaller specific purpose grants for services such as family day care, recycling initiatives, etc. In total, $3.3 million was received in 2023/24 from these grants, or 2.49% of total operational income.
Council also seeks grant funding for capital projects (such as cycleways) when opportunities arise.
The main source of funding for the provision of local services and infrastructure is rate revenue, user charges and fees, and other income such as parking fines and rental income.
What is depreciation and why is it important to fund depreciation?
One of Council’s primary responsibilities is the provision and management of infrastructure. This infrastructure must be maintained to provide service to the community.
The total value of infrastructure in North Sydney Local Government Area is $2.18 billion.
Depreciation is an expense recorded in Council’s financial statements and allocates the cost of a long-term asset (such as a building, road and other infrastructure) over its useful life. This process ensures that the cost of the asset is spread out over multiple periods, reflecting its decreasing value.
Depreciation is incredibly important in ensuring intergenerational equity. If depreciation is funded, it ensures that each year, the community that enjoys the use of the infrastructure provided, pays towards its cost.
Where depreciation is ignored or not funded, infrastructure renewals are not able to be undertaken as they fall due, leading to failing infrastructure.
Council’s forecast cashflow (based on no rate increase, as outlined onPages 12-13 in the Long-Term Financial Plan) shows an increase in cash of between $6M and $8M for the ten-year period. Why is Council saying that it has liquidity concerns?
Council is restricted in its use of cash and investments generated through developer contributions, domestic garbage charges and specific purpose grants.
By legislation, developer contributions can only be used for the infrastructure included within Council’s Development Contributions Plan. This plan identifies $402 million in infrastructure projects to support a growing population, with developer contributions estimated to generate approximately $195 million towards these projects.
Council collects developer contributions each year and the funding reserve increases until projects can be delivered. This occurs when:
It is therefore important that Council builds ‘unrestricted cash and investment’ levels to meet this requirement.
Council projects its ‘unrestricted cash and investments’ to be critically low as at 30 June 2025 and unable to maintain current services without increased revenue, reduced expenditure or further borrowings. This means that it is also unable to provide required funding to realise projects within the Development Contribution Plan.
Why hasn’t Council provided a model that includes more loan funding to reduce the level of rate increase?
Council currently has $51 million in debt associated with the North Sydney Olympic Pool project. Further borrowings may be required within the 2024/25 financial year due to current liquidity levels.
If Council was to consider additional loan borrowings, the rate increased would be delayed, not avoided. A cumulative increase in rates to generate the required income level plus loan repayments would still be required and over time, this would result in higher average rates.
Delaying an increase in minimum rates would also reduce the additional income generated by new housing development within the next three years.
Council continues to face financial risks associated with income from user charges and fees. It is important that revenue levels are strengthened.
Consideration has been given to both comparative Council rates and capacity to pay analysis in proposing the options within the SRV proposal.
Has Council considered selling assets?
Council has considered selling assets, and as recently as October resolved to enter discussions regarding a possible land sale in Cremorne. Council’s improvement plan also includes consideration of land sales, and the Draft Governance Strategy includes a review of Council’s property and building assets.
In considering the sale of community property, the following considerations should be given:
Further, property sales provide a one-off revenue stream, and will not provide ongoing revenue to fund Council services and infrastructure renewals.
Is the proposed rate increase permanent?
The proposed rate increase is permanent. This means that total rates income council receives will not reduce back once the SRV implementation period concludes. After the SRV is implemented, total annual rates will increase by the standard rate peg, approved by IPART for that year.
A permanent rate increase is necessary to address the long-term needs for service delivery and infrastructure improvements.
While the rising costs of the North Sydney Olympic Pool project have accelerated the decline in Council’s financial position, there is an underlying issue of current rate levels being insufficient to meet the expectations of the North Sydney community for service levels or infrastructure quality. Reliance on other revenue sources, such as on-street parking fees, fines, advertising, and commercial rental income, has proven unsustainable. Additionally, our aging infrastructure, valued at $2.8 billion, requires significant investment both now and in the future.
The chart below compares current and projected residential rates for North Sydney with those of other councils in the region and across Sydney, excluding the SRVs currently under consideration.
As the chart illustrates, a permanent rate increase is essential to bring North Sydney’s rates to a sustainable level that is comparable to other councils, ensuring the ongoing provision of the services and infrastructure our community needs and expects.